11-17-2009

European Commission Closes Infringement Case Against Germany




- Eased Requirements for Public-Public Cooperation -

The European Court of Justice created more leeway for municipal cooperation. In light of this, the European Commission closed several infringement cases against Germany (Press Releases IP/09/1462 and IP/09/1465 of October 08, 2009).

Thus, the Commission no longer maintains its allegations that public procurement law was infringed by intermunicipal awards of IT and waste treatment contracts in Hamburg, North Rhine-Westphalia and Rhineland-Palatinate. It yields to recently further developed ECJ case law regarding public-public cooperation forms not requiring the application of public procurement procedures (cf. ECJ, Judgment of September 10, 2009 "SEA", Judgment of June 09, 2009 "Stadtreinigung Hamburg" and Judgment of November 13, 2008 "Coditel Brabant").

Vertical Cooperation

Accordingly, public-public cooperation is not subject to public procurement law if the public entities carry out the essential part of their activities with their public owners ("vertical cooperation").

This had been confirmed by the European Commission with respect to its infringement cases in Hamburg and Rhineland-Palatinate. The Commission changed its view. It considers the contract for supply and maintenance of software applications for registration matters of residents concluded between the City of Hamburg and public-law body Dataport permissible. Dataport is jointly owned by the states of Bremen, Hamburg, Mecklenburg-Vorpommern and Schleswig-Holstein, is jointly controlled by them and carries out the essential part of its activities with these owners.

Horizontal Cooperation

Horizontal cooperation is also possible now. Jointly controlled entities, such as special purpose associations, are no longer required. A not for profit cooperation without private partners will be sufficient if it is aimed at jointly ensuring the execution of the public tasks of the cooperation partners (horizontal cooperation).

For this reason, the European Commission closed an infringement case on service contracts for the treatment and disposal of waste concluded between administrative district Alzey-Worms and a public entity exclusively owned by neighboring municipalities and administrative districts. The contract partners included solely public members which all were involved in the establishment of the cooperation agreement, here in form of a waste management plan.

Another infringement case on IT services in North Rhine-Westphalia was also closed. In this case, public partners had established cooperative structures in order to ensure their respective tasks in the area of IT operation. What was important was the fact that the cooperation was solely governed by considerations and requirements relating to the pursuit of objectives in the public interest.

Importance for municipal practice

In closing the cases, the European Commission follows most recent ECJ case law regarding intermunicipal cooperation. Unexpectedly, leeway for cooperation is now returned to municipalities which had been blocked by public procurement law in the last few years.

ECJ judgment "Stadtreinigung Hamburg" of June 09, 2009 is now being specified by the European Commission. "The importance for intrastate and intermunicipal cooperation far exceeds the individual cases concerned. Within the State, organizational bodies may now award contracts to each other without requiring the application of public procurement procedures even if they are different legal entities," explains Dr. Ute Jasper, attorney at the Düsseldorf office of law firm Heuking Kühn Lüer Wojtek.

"In addition to the known "in-house" contract awards, the ECJ and the Commission opened a new exception case and thus offer new room for maneuver to public entities," adds Barbara v. der Recke, attorney at Heuking Kühn Lüer Wojtek.

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